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Opposition Critical of Government Innovation Policy as Australia Emerges from COVID-19

May 11th, 2020

An article in The Australian by long time Labor Industry Spokesman Kim Carr this week has been critical of the Australian Government’s R&D Tax Policy, and has linked this to decline in Australian manufacturing and supply chain weakness.

Highlights form Carr’s article include the following:

• The government reintroduced the R&D Tax reform bill in December 2019, despite:
  • A senate economics inquiry concluding that a previous iteration of the bill should be withdrawn due to concerns over complexity, particularly the controversial intensity threshold;
  • Widespread condemnation from industry, with a consensus that the intensity threshold would punish local manufacturers and risk driving R&D offshore;
• Recently available figures from the Industry Department conceded that business expenditure on R&D had declined by more than 12 per cent since 2013;
  • Australia continues to fall behind in international innovation rankings and are no longer among the top 20 innovative nations;
  • Australia, ranked 50 on the Harvard University produces the Economic Complexity Index in 1995, has dropped to 93 in 2017.
  • Other countries (namely, New Zealand) are offering enhanced incentives for R&D Activity at time when the Australian Government’s policy includes a significant cut to R&D Tax Incentives.

Many of the points raised by Kim Carr are valid, however in the interests of balance, it should be noted that whilst in power, the Gillard government also enacted cuts to the R&D Tax Incentive.

Swanson Reed recognises that the government has offered generous industry support during the COVID-19 situation via the Job Keeper, but this must be complemented with a withdrawal of the proposed R&D Tax budget cuts reintroduced during December 2019.

Swanson Reed calls on both sides of government to commit to a stable R&D Tax Incentive, and is of the view that the programme would be most effective in achieving its policy objectives if not subject to further proposed changes.